How income tax works in Canada
Canadians pay two layers of income tax, federal and provincial, plus CPP and EI from their pay.
Income tax in Canada has a federal layer set by the Government of Canada and a provincial or territorial layer set where you live on 31 December. Each layer taxes income in slices. Quebec has its own system, and Revenu Québec publishes its rates.
Federal tax rates for 2026
| Taxable income | Rate |
|---|---|
| Up to $58,523 | 14% |
| $58,523.01 to $117,045 | 20.5% |
| $117,045.01 to $181,440 | 26% |
| $181,440.01 to $258,482 | 29% |
| Over $258,482 | 33% |
CPP and EI for 2026
CPP is 5.95% of earnings between $3,500 and $74,600, a maximum of $4,230.45. Earnings between $74,600 and $85,000 pay a further 4% (CPP2), a maximum of $416. EI is 1.63% of insurable earnings up to $68,900, a maximum of $1,123.07 outside Quebec.
Worked example: $85,000 in Ontario
After credits, federal income tax is $10,226.60.
After credits, Ontario income tax is $4,574.46.
CPP and CPP2 are $4,646.45 and EI is $1,123.07.
$85,000 minus all four is $64,429.43, about $5,369 a month.
✨ Key Takeaways
- There is a federal layer and a provincial layer of tax.
- CPP and EI are separate deductions.
- Quebec and Manitoba are not covered here.
- Check the CRA for the current year's figures.